On May 13, the Senate passed its flood reform bill (S. 2284) along with 13 amendments. Now titled the "Flood Insurance Reform and Modernization Act of 2008" and designated as an amendment to the House flood reform bill (H.R. 3121), the Senate bill has been placed back on the calendar and awaits a possible compromise with the House version in a conference committee. A single bill, if eventually passed, would then be presented to the President for consideration. The Senate bill, as further described in our legislative summary, contains several provisions that would impact lenders and insurers including the following:

-Reauthorizes the NFIP through 2013

-Forgives the NFIP's debt resulting from Hurricane Katrina

-Increases lender penalties for non-compliance and introduces non-compliance penalties against WYOs (Write-Your-Own insurance companies) for failure to comply with reporting requirements

-Creates a Flood Insurance Advocate position within FEMA with responsibility to conduct random audits of WYOs to investigate the allocation of flood losses to the NFIP, to help establish procedures to take punitive actions against uncooperative or violating companies, and to conduct investigations into the operations of the NFIP

-Revises the definition of Special Flood Hazard Area to include areas of "residual risk" (areas located behind levees, dams and other man-made structures), thus making these areas subject to the mandatory purchase of flood insurance requirements

-Requires lenders to notify borrowers at loan pay-off that flood insurance may cease and to advise them on options to retain coverage

-Provides that no changes in flood insurance status can go into effect (either for flood insurance rating or the mandatory purchase of flood insurance requirements) for a property found on an updated Flood Insurance Rate Map in the St. Louis District of the Army Corps of Engineers until the remapping process is completed for the entire District

The proposed changes to the NFIP may directly impact your business processes or practices. We urge you to review the bills with your regulatory affairs department or industry association, and if appropriate, take action by voicing your opposition or support by contacting your Senator or Representative as Congress works towards a final reform bill.